Event: the company announced that its revenue in the first half of 2023 was 944 million yuan, down 6.6% from the same period last year; the net profit from home was 21 million yuan, down 38.4% from the same period last year; and the net profit from non-return was 18 million yuan, down 42.7% from the same period last year.

The operation of the company has gradually improved. The company achieved revenue of 530 million yuan in 23Q2, down 9.7% from the same period last year, and an increase of about 28% month-on-month. The company's main business is wireless communications IC, RF IC and sensor distribution, application design and technological innovation, Q2 is still affected by the current weak semiconductor demand, but from a month-on-month point of view, achieved good growth. The company's Q2 gross profit margin was 10.4%, slightly higher than the previous month; at the end of Q2, the company's inventory was 412 million yuan, which began to decline from the previous month, indicating that the main business has gradually improved.

The company's customized and self-developed chip business is growing rapidly. The company actively arranges self-developed chips. During the reporting period, the company added new product lines such as micro-energy collection and ultra-low power wireless chips, AI smart speaker chips and MEMS loudspeaker arrays in its main business and industrial layout. In the first half of 2023, the company's revenue from customized and self-developed chips reached 48 million yuan, an increase of 46% over the same period last year. In May 2023, xMEMS announced the full availability of three revolutionary MEMS micro-speaker solutions that can be immediately integrated into the next generation of TWS headphones, in-ear headphones, digital hearing aids, and smart glasses. Driven by the industry leader, MEMS loudspeakers are expected to accelerate penetration, driving the company's self-research chip business to continue to grow.

Prospective layout of Chiplet and deposit and calculation integrated chip. The company works with industrial partners in the forward-looking layout. On June 8, the company and Strange Moore jointly established Ciprit Intelligent Technology (Shanghai) Co., Ltd., in which the company controls 51% of the joint venture. The joint venture company will use Chiplet technology to realize the flexible delivery of chips such as the integration of sense, memory and computing.

In addition, the company also reached a cooperation agreement with Jiutian Ruixin in the first half of the year to create integrated chips for customers. At the same time, in manufacturing, the company cooperates with the National Chuangchuang Center to start the ecological construction of the integrated sensing and computing industry, give full play to the technical advantages and industrial status of the National Chuang Chuang Center in the field of MEMS sensor characteristic technology and advanced closed testing, and carry out IC customized design and industrial cooperation in the fields of intelligent acoustics, smart home and biological testing. Through the upstream and downstream cooperation layout, the company is expected to seize the opportunity of deposit and accounting integrated chip.

Investment advice: based on the rapid growth of the company's customized and self-developed chips, as well as the forward-looking layout on MEMS speakers and Chiplet, we expect the company to achieve a revenue of 20.2x2.42 trillion in 2023-2025 and a homed net profit of 0.66 trillion. Based on the closing market capitalization on August 17, the corresponding PE is respectively times that of 69-43-29. Maintain the "overweight" rating.

Risk tips: the risk of R & D failure; industry competition aggravates the risk; downstream demand is less than expected risk.